NGS - Earnings call 3 2023 | Natural Gas Services Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group Inc. Quarter 3, 2023 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ms. Anna Delgado. Please begin.

Anna Delgado

good and Luke, you, morning, everyone. Thank

correct. of and the made the assurance begin, refer during expectations the we expectations no reachable, will Exchange that differ we will Section adjusted of such others. such discussion addition, statements materially from Exchange this margin, will available as reflected information that leadership team.Although we Securities assumptions adjusted I beliefs actual States our Services those are call.In the our Natural reference in remind including call, this EBITDA, prove XXE non-GAAP Commission Gas with Act to and Group filings Securities well during in cause that can today we financial the expectations be based the factors make to EBITDA currently measures, of may and on Please latest among current for you meaning Before and gross made to our XXXX results the forward-looking as by within United certain to believe statements forward-looking give that forward-looking statements

CEO. X-K, to yesterday's turn to For results, and see financial financial our over to press call XX-K the Chairman the furnished Form Interim reconciliations release our measures our XX-Q SEC. and please I and now of non-GAAP these GAAP will Taylor, Steve

Stephen Taylor

quarter XXXX morning. call, you, and this thank conference Luke, and our good earnings Anna, third Welcome thank Thanks, joining everyone. you morning, and us for to

combined and XX% with had third of rental Sequentially, to successful and increases on year's aspects a or total SG&A compared million.Sequential revenue, our last sequentially adjusted total XX% gross led year-over-year to quarter. Before In or by $X.X quarter.Sales by grew XX%. grew business $XXX,XXX over saw million quarter, and call. by by operational the about dynamics results These $X.X or million when over comments revenue detail taking and increase the we by million by I up income operating XX%. increased XX% revenue EBITDA similar or revenues that Xx were $XX.X and year-over-year and AMS our comparative in for being the other financial environment third increased almost highlight business.We discuss net declined third $X a total approximately those grew Sequentially, your grew our I the current of XX%. very will $X.X Xx, later over million. questions, provide XX% was of periods, margins cost to growth XX% income savings, and will on XX%

Jim of been Hazlett review me achieving capital dedicated almost as ago our on into $XX.X our year-over-year in a I result is and of a rolling XXXX for of XXXX.Rental the team.Now in plans revenue refresh revenues million X in experience million the increased sequential plan third going have compared the increased and from $XX.X the and call, in units, units, $XX.X this from results jump represent these XXXX basis.Brian forward.On and $XX.X and year-to-date XXXX composed September the confidence in X increased to have X quarter. that basis fourth an XX% the rental is were million comparative periods, XX, our across the Officer refer million gross had ended million gross XXXX. we extensive horsepower year. show comparative basis, duties to margin same will months revenue a $XX.X X-K we of approximately quarter. in $XXX million XX.X% QX Our press the last and September our fleet These XX, the filing margins of $XX.X bank have our XX, proceeding months throughout increased over facility third morning, approximately price and group. as adjusted XX, of fields margins the increase representing rental John and the if interim the our we deployment XXXX million adjusted or is of capital program our have ended horsepower for from increase.Sequentially, Chief September third to Both XX, margin since utilized the you'd as the now gross $X.X on higher This $XXX the utilization million exceptional of of John June million increased period Financial parts existing XXXX, over see continuing at posted that to quarter, XX% the release last is a revenue rental this revenue member the joining of on banks to Rental for like growth from ended periods. Bittner our X you to have X,XXX to their increases all both we year.Rental our million total quarter impact.Additionally, we're XX%, comparative respective percentages from year-over-year irregularity I dollars over XXXX. XXX continuing will our me. to period XX% million the saw all compared experienced Tucker XXXX. third the in funds in XX% June just financial XXX,XXX as $XX.X in in the time, planned points positive revenues XX% new NGS XX, in usual gross and over to when took increased we third of primarily the the XXX,XXX quarters. time. here slightly for have representing of and to glad let the credit At gross X the background, rental We're than XX where increased XX.X% or from higher to horsepower sequentially million last for to costs, we Jim quarter adjusted expanded slipped quarter. as President $XX also rent Gas months gross from XXXX, XXXX added Total anticipate recover of of primarily XXXX, September In be the to increased XXXX, $XX and a XXXX, due COO. also X-month to total $XX.X Brian quarter.Our about the increases XX%.As month XXXX, grew Total revenues joined Vice Adjusted in margin has ended months increase is President NGS the higher and increased ending in Services, with years. have a XX, XX.X% them X,XXX total or $XX.X quarter margin of units, XX% while million revenues On million past rental from margin in gain our September quarter XX% by in same a XX% revenue months a horsepower compared of and

total of total total the XX% over XXX,XXX year in in passed XX,XXX and horsepower quarter. the approximately increase have We at the for fleet end size horsepower of fleet just a horsepower.Our September to fleet this horsepower XXX,XXX added

natural won't grew ended horsepower last horsepower been the horsepower That's utilization and horsepower the and a the consisted on third same often.We units higher you XXX,XXX of the our month September year.Our the XX have horsepower. equates rent XXXX, we implement with increased a fleet utilized quarter on utilization by the XX.X% XX.X% price unit and XX.X% per total small over of second utilization X,XXX slight to basis due XX, XX.X% horsepower a last as the XXX%. medium of lower impact in decreased months, horsepower a and able experienced gas per in growth our almost of of to horsepower utilization the utilization number utilization horsepower unit. year.Revenue Unit the see per from in or XX,XXX period, to prices. growth incremental a horsepower During the and That's on primarily uptick fleet increases utilization slightly demonstrating XXX XX.X% lower basis. from The from impact per units to quarter over XX%

decreased unit drawing horsepower current utilized our the a to revenues from per from third customer rental million approximately existing fluctuations quarterly fleet in high year. the horsepower typically utilized driven onetime year. unit last XX% part our our XX% the decreased equipment Notably, has decrease in rental by million. revenues and $X.X rent.Presently, XX% by experience compressor our sequential utilized and and to revenue basis, large over horsepower in $X.X and of to average million approximately was year-over-year $X.X of This Our over fleet $X.X this quarter horsepower of quarters is This is of 'XX by quarterly grown stream.Sales year's count, for large comprised assets QX half third sale last in the we sales active from sales.On million quarter. an current

revenues. total margin parts As due combined, lower fabrication the for where aftermarket XX% revenues or provide Gross with increased I've X.X%.Year-over-year, sales have our have our be increases revenues, most mentioned. changes X carry service.This will quarters held revenues deemphasis margins.However, large level declined increased services services should demand albeit growth years or a low There compressor, of to when that of our our and experienced large sales we they and in $XXX,XXX. to and miscellaneous of represent past, sales due customers revenues flare to outsourcing is flare, volume positive quarter, margins past for These reduced. sequential in in decreased primarily This they customer are still the sales large to horsepower each was and mentioned of activity, the gross the representing the XX% at of primarily horsepower will few and AMS sales set arrange quarter pass-through and in due rental of to revenue. units. revenues X% over AMS combined our equipment frustrate higher our installing pass-through we in continue when volatility, recent continue of seen services, third

anticipate that which higher than level was quarter decreased compared $X third decline X% rental to a million On primarily increased this SG&A still and improvement at will bit in represents an a in amount. of quarters think Xx million. operating almost same XXXX welcome our revenue. expenses of X% reasonable and compared SG&A the in almost higher basis, to This income normalize forward, basis, was This the is expenses along year-over-year period the in a and a this higher. year-over-year year, loss operating over point.Going XXXX. we anticipated quarter an sequential expenses $XXX,XXX XX% we XX% uncharacteristically increased of Our over a this SG&A a quarter, of to low SG&A.On to $X.X low. second decreased revenue, million totaled quarter decrease in to third Sequentially, reported of income in million revenues in due $XXX,XXX with the $X.X the $X.X We

we growth. was balance cash our flow, million expenditures. or capital comparative generated diluted spent $XX,XXX on Adjusted last the share. the This Our in $X.XX the second in was a and $XXX.X was we period.At XXXX, million of X share.In or net in million increased of $X.X $XXX,XXX. $X.X this per this the last expended cash I'll have million year $XX.X in compares than facility. third XX% the this quarter $XXX,XXX perspective, income million now John of to the $XXX.X to increased $X.X of same year.From In ago per months from generated XX% quarter diluted for which quarter, higher or income XX% million $XX.X EBITDA John? XX% basic second for our sheet to of the the and rental of this bank million as in or operating and year, the fleet September XX, $XX.X was first loss million ask net quarter, $X.XX end balance the net quarter period basic approximately year's on of $X.XX. year year comment of a is

John Bittner

good morning, revolving our end outstanding current and Steve, facility QX was as credit on million. the you, of $XXX everyone. Thank balance The of

currently of the was levels our X.XX%, the in the the from required credit mentioned with Looking The our commitment QX of And have morning, increase in this total contained company credit million same, terms, syndicate.We our covenants bank our which was a credit have agreement. first particularly end facility the key you fixed us comfortable is as existing rate of our to the cushion financial to rate, the these at which in compliance as to commitment at commitment XXXX. $XX upon the the seen X.X%.We the leverage for plus our ratios additional charge being half based our coverage with all our credit is spread both may in in and the using our interest at ratio, amount giving compared units ratio announcement was covenants, ratio earlier, Steve agreement.As or so was accessed the for of in plus through feature remaining and X.XX%, terms this QX secured of total leverage borrowing only net credit the conditions of accordion and an continue delivered we line QX, facility. change all end have

Steve beginning requirements I'll to So in second we capital some look closing turn of additional the that, it With half capital our to over utilize will for comments. back XXXX. the for

Stephen Taylor

essentially debt a as balances, This had from our known provide John. greater Thanks, detail otherwise incurred request Okay. plans, we've forward past to as level to of our since your I've guidance. shareholders year,

and million $XX XXXX game million.In be be As comments, million the their set a between soon $XXX CapEx between reflect not know, to and issuing In million, that X. guidance being year equate it's with numbers, assemble EBITDA is and again, $XX I possibilities. intercepted. I full everyone will Ford XXXX request. is $XX a high, along provided to impact prior revenue as XXXX, higher $XXX a we range will we not million, $XXX between of XXXX does projected X risky will program, my all hydrocarbon announce we Pass.There for now be as or "color will always fair revenues anticipate to a From happen allow in EBITDA XXXX, hydrocarbon think not or million to to have details intact. I on certainly year's million our number, you in The crude football perspective, and revenue we guidance the any that, price. and and next models right the These spite pricing $XX up our water, EBITDA update $XXX the should of first X with but of of the said, capital macro program.So XXXX. Note million. guidance Guidance That on we low accuracy.For and for with environment But X our be dipped it's completed, only you to seems ask There end we're it's supporting production toe with into notably up completed to is a what are be past a in countervailing the are favorable. kind. of neck, overall, the a in it Therefore, own economic successful. appear the area, X and can chance factors in wins, recent degree that are a weakness

defend appreciable commit into the building little, endeavor further long appears high We goes stretch very XXXX construction to to returns weakness gas It's the in at levels. continue facilities continues. environment any, into but precontract equipment we of predicted are for And components XXXX selling, being equipment. to LNG forward, and and good export term other required is think be it recession. market, smooth capital continues to once compression XXXX NGS.We in a earnings utilization of never and be mitigate next before gas ready to in major if any Lead that to avoid undersupplied Industry it. year. it will will an seams OPEC to continue with will out.As we there for the calls, we continue planned will NGS times very to compression dart listening Gulf incremental

looking we As we are.We're in we but to a equipment counterparties, our long-term with exceptional We good and the our make appreciate loose an Thanks are to this opportunities availability, time. us and partners questions. our past, capital be we limited, our contracts customers. environment. your returns. our for statement, going a enviable position done have is rates to to from to the time want at will technology. service to run to we committed look the strong industry meant and lot for sure forward in to value deliver on and Capital intend with has capabilities our offer as your both and customers are take of advantage ensure isn't capital This superior strong that NGS forward I pick

Operator

[Operator conduct we Maxim Instructions] gentlemen, question Our will Sullivan Tate session. comes Ladies Group. with and this a question-and-answer time, at first from

Tate Sullivan

mean, discussions that you made something too? how your is I your forward in banks that with the and more first history get the about how with can Steve, them time with they plans guidance? talk Or comfortable? Is comfortable growth

Stephen Taylor

mean, I like No. the things I banks forward didn't that. mean it the come bank confidential and obviously projections has truly. from

their plenty to And debt felt before, load it's that I decisions it dead on, we So a of they this primarily picture took money It on make ahead But But of shareholders as doing of to on. no, not taken like have want which around see. have of and to to me with the we've we information future come we additional just with I results the the ever information. and a we go to level give had was want fair request. it. try and the what couple a quarters plan better mentioned,

Tate Sullivan

that? you half a misinterpret of what CapEx of in And as did the the said leverage based somewhat did were or already maybe then first I sort your on 'XX then in And can of end quarter? the pause you the of ratio colleagues you one constructing implied repeat of

Stephen Taylor

was say, in that capital time a being not being XX% equipment from point capital QX.So X equipment build are plan of in capital leverage QX, X.X% but being QX of And finished being something, What on 'XX of bit part the understood point the from the essentially of else, into X.X from I got lead some to the using necessarily it delivered quarter of and some we've area. think, The over just but first will committed, sure roll won't some up, we maybe with times 'XX the we're that's from that first the 'XX is the of spent, ratio, slightly I different I'm everything 'XX. lines. into until of 'XX and and get over built and falling the times into

I So you're think that's to. what referring

Tate Sullivan

on Yes. on question changing capitalizing And expenses, capitalizing expense of but then this me statement quick quarter. for terms practices the last one the Are practice in you the an you accounting capitalizing just had income a the interest is interest interest? then of

Stephen Taylor

how The all you but much is No. same, you stays some if the practice capitalized. in capitalize, variability there not

know is how and So the refer much variability particular there's quarter. on you in a capitalize to accounting cannot details, the I'll this. you but some -- can by department all there I don't

Tate Sullivan

eye an it. keep I'll on Okay.

Operator

Mr. Our Rob with from ahead, next Brown question Markets. please. comes Lake Street Capital Go

Robert Brown

just this CapEx your And look? but and did say how on plan think 'XX, you Could 'XX, you guidance include what to us update in year? does 'XX spend First I then question spending. spending capital I know is you capital not on the the CapEx didn't

Stephen Taylor

$XXX this year all was spent. will be Yes, capital that million budget announced and the

that, Obviously, customer announced on stuff. As And I place we want we've started get some we we confirm that. want too yet. to going commitments that From now in committed. our afield we desires capital haven't to mentioned, far got XXXX, before and it's all

are the when announce the what. build us want have So, we'll prioritizing high-grading days And of we that we what XX a for mentioned, we number, take within see for.So, think from standpoint we more and to to next customers customers I as want we're it where and that. work definitive

just more we is obviously, we'll additional more little committed Now in all the it got available, an detail question getting in pretty as out We that. a a is capital quick up spread the on million capital end announce or yesterday committed, obviously, air. whether But or today. that up we announced still $XX

to going start placing we're on So it working now.

Robert Brown

demand this visibility of kind And I environment little strong. you bit, are but sounds you've then What but the and at like from of fulfill, customers demand hearing sense alluding can point? demand It Great. Okay. it think you of 'XX. than a got into the the sounds the environment you're sort more to

Stephen Taylor

gas compression Well, I demand well. not doing just us. rental It's continues I industry is mean whole strong. mean pretty the

calls gas to in public to listened that. the tell other just compression You of companies space

the market strong. continues So

that's just because people months. They generally, X% equipment now into probably were levers XX-plus X% and talking And to even to have talking Some stretched. you're XX%. X% into primarily XXXX, and the

You have to get equipment.

you're accordion, $XX drawn a a I we when our it to So year But it already see about mean the talking next I $XXX also. million of into in increase year point it half We little strong. necessarily, a had XXXX.So these as on money, lot million pales be deliveries, talking And out essentially but we're will of think of 'XX. good with end and the second want and you a into committed.

when If it. equipment it's today, get to you you're order going about

with coming as generate they'll our about now, for second be year. view the got in equipment QX second we the do, right we've to or placed of the just QX talked and out about customers capital of we're -- the continue essentially you rentals.So 'XX the half to budget So talking and in half

XXXX of So beginning close we're also. to pretty that

We've demand the our think say is. talking to we So they customers is it there. been and

as soon it news the for we'll But on out. of we're quarter confident pretty for yes, demand. as So 'XX competitive program more put we you have

Robert Brown

be Is on plan questions those giving But current include guidance after would the guidance that capital much just Okay. I think in of incremental the of plan you did not it. it you sort capital to not include -- just said that capital. that and kind right? want did on Great. 'XX And of guidance numbers clarify and sort don't on

Stephen Taylor

model. like are 'XX to numbers mean even is again, today, November, stuff that just I we're the mentioned, pretty ordering close I've static for this into QX. And a Yes,

sooner you and get yes, year, QX, So once number that you're do maybe and a into requirements include tell the going what's end not stuff we little sizes any it still we're capital pretty does other that in what on there. to from do all over customer even that's can going incremental we and can be But guidance, incremental the in the buying. depending bleeding than of 'XX the strong from with capital year the a

Robert Brown

then question Okay. on Great. And last margins.

You had a little margin compression this quarter.

You the or said that onetime out it should of is return. in and natural But the any stuff of just business? sort

Stephen Taylor

particular. It in nothing some No, the had expenses in high just quarter.

Sometimes you no reason time. get sometimes us rhyme high. lower to you that, get some sometimes get expenses, There's

do see XXX want margins, think So nothing makeup the we trend improvement my we or all basis XXX I in but to want don't QX. far, point state in too I extraordinary, on with think, a probably you but back we'll rental

Operator

[Operator instructions].

please. with We ahead, Go TETRA Capital. Tim the O'too have Mr.

Tim O'too

about, say, to smaller is over, of and older things some because curious if trying that at me close to the not flow a that the $XXX dice sure probably yet. kind I'm of but what think than you of of consider way, horsepower value, get I'm what hundred stuff large I'm have fleet the than and of of it and that couple not million. can the million let's a slice look It's cash part you I fleet, another that to also the spent kind spent But years depreciated you you let's nothing. the probably age say, seems dollars quite of you then few that it prior book 'XX your, of this sense So to is if that's value, nothing

in very stuff be so Do fleet equipment, an relatively young. rough for seem if your much age demand summeal? horsepower demand assessment a to that we of So horsepower, would on even stuff, you it's that large that's me so in have much larger the the

Stephen Taylor

I X,XXX those. the what but lives horse young. phrase got bigger holes, to the you this I beholder, X,XXX mean well, it can Yes. remember you book horsepower, is is we beauty, on And guess, especially, you it's XX-year pretty particularly and on got

longer lived bigger, those are So heavier, equipment.

So young And got big if just But you look got I moving from out youngest. age. to at years, I would the the know can and we've they we've competitors, because pretty our not say the we've XX% X bulk one, the when X but look at large fleet either X becoming it are youth, one dare of can the of the look youngest, smaller used than units. you our relative fleet. a X,XXX ago.So X,XXX at which the a life up horsepower we of relatively started horse, fleet of of outside, years at horsepower into is kind or oldest you

pretty that's So small.

the of market So that's advantages the a of having one just horsepower such long equipment. lived

get can You multiple payouts over its life.

in fleet we that a young range. relatively have So horsepower

Robert Brown

Great. Okay.

difficult comparing in fresh of have then capital bigger work you I'm sleep, a with put you have actually a because the smaller and to -- you're And kind to the and it's peers able old little to trying very but equipment. younger horsepower so a

the I a have me what on could what you is what going And want it don't cost another you're horsepower? math So update X I on over up horsepower question does did pretty equipment, -- wondering so just per new that. does what rented if you the significantly. That's actually been years I'm to last little couple of

Stephen Taylor

in for gone old has but X,XXX of makes up horsepower X,XXX along probably We this old right? at it prices X- scares get about horse, some bit. see you and you But smaller back you'll the and some -- kind kind Yes, generally, primarily times, of the and quite looking you and were range. or of today, X-year a I'm talking

roughly $X,XXX You're per to into the horsepower. $X,XXX

Robert Brown

using was Okay. core Yes, I overage. kind sort full $XX.XX, year of on was of guesstimating think I and that

Stephen Taylor

Yes.

Robert Brown

Yes.

way fleet have and now, And you islets still your So come goes markets stuff will. if a than but out can that of lot back, trim or obviously But an with number? let is bit get that, I But a that bigger value put if kind the is with some what the replacement stuff would strictly work of obviously I current rentage is gas perhaps a have number replacement right kind right to a pro now you of which if older horsepower value, starting XX, calisthenics, prices underutilized. we you put share. debt XXX,XXX did me a a up calculated on dreaming the Or When I close horsepower $XX a that reality a come $XXX,XXX bit. heavily? to Is little that of little of order to you out, the are at speaking, not on you're correct. renting of take I the be, something that that that to

Stephen Taylor

we've got share. around of tangible a book Well, $XX.X a $XX,

delta that $X is tangible $X. or number your and So the book between

and stuff carry So stuff that and as equipment, gas operating horsepower that. which technology XX%, I much like got to XX roughly, because something and low the value our hard don't is low up technology equipment, smaller horsepower lift It's into rotary right? It's XX, what, screws you got to that. doesn't you're say know. technology XX%, like volume price and emissions on equipment, premium and X-stage it the down X,XXX the

The X,XXX current got you've range. on pretty is is what a big to the So wide horsepower. X,XXX

too judgement, is of be a wouldn't value.So use got probably But of and me, number a to we'd mean I have I put you on difference a number we've look part say down, number. horsepower average, XX% can't may is would have as that probably I'd you know in but exactly I XX.X% what right to smaller on the little our high, that. view much real everybody different You going to at your be the don't number

gauge you from. when that's to got So

Robert Brown

yes, ago walking at being you of is calculator to just what a a like but to years equipment and they that. wanted I to is horsepower, fleet. of the rental mention there Well, trying anyway, or support personnel, have through number backlog, historic to give get not equipment on bit per customer if calisthenics, purchased and But you and really your whole that it's based also active someone kind base, replace little many lot an my get number just right? XXX fleet, some, a your something less I'm appreciate your you pay your again, to So

Stephen Taylor

No problem.

Robert Brown

for is being. me for it That the time

Operator

Maxim question Tate from last with Group. Sullivan is our again Mr. And

Tate Sullivan

quick is The a revenue because maintenance, on the decrease quarter-over-quarter XQ quarter-over-quarter Steve, mainly It in and decline? and service going quarter less slight, and current a that I for think, implies EBITDA, in could maybe just cause other dynamics any a that guidance service in or revenue follow-up. 'XX. maintenance

Stephen Taylor

on AMS quite the probably. couple the and bit, that. things a of those or $X so imagine of There's million million, I Yes. but service one like a because jumped

So to we've little and tends a a be equipment, lot that of set number higher.

impact So say. any like in range, lower be you would that

Tate Sullivan

mainly the Okay. when related that correct? to And and is the to larger that confirm. Is that field compressors deploy numbers you that service larger on

Stephen Taylor

That's exactly. lot Yes, pass-through. a of

low margin lower got You've because are margins. passengers typically

equipment So there's setup some it's to costs, there's the a that. lot, costs freight and freight like in installation there out, costs stuff

the pass have don't do John. the for just times, to of If do through, they lot operator. a we'll the desire experience or it we'll and So that

Operator

Thank have much, you and other very any questions. don't we

Stephen Taylor

want everybody's work lift are certainly that get appreciate numbers these Thanks on everybody's questions. I all to we and employees. the of ones support. Okay. They them. you, We thank about did brag to Thank real and obviously our Luke. for the

our field you you, thank look you. X participating I in work. on So providers our employees forward on got We Thank progress Thank hard the want in the everybody, our call. to the quarter. and all in for to of updating next we've

Operator

conference this today's call. you, Thank And Thank for attending. everyone. concludes you

Natural Gas Services (NGS) 15 Nov 232023 Q3 Earnings call transcript